Which one should you choose for long term investment? | Rare Techy

Adani Power and Tata Power are the two largest power stocks in the Indian market. Adani Power, however, has fared better than its peer Tata Power in the last 1 year. At this time, Adani Power has risen almost 5 times or as much as 385 percent while the latter rose 81 percent.

Power sector stocks have focused on the back of electricity demand during the summer. With rising temperatures across the country since mid-March, demand for power has suddenly increased, widening the demand-supply gap. Amid rising demand for power, this stock is becoming more attractive.

Only in the year 2022 YTD, Adani Power has increased almost 4 times, more than 280 percent, while the latter has added 6 percent during this period. In 8 months of 2022, Tata Power has given negative results in 3 of them, while Adani Power has only 1. Since the market recovery in July, Adani Power is up around 40 percent while Tata Power is up around 15 percent.

In the long term as well, Adani Group shares have given good returns to its investors, rising from all around ₹28 in 2017 is now trading around ₹393, rallying over 1,300 percent. Meanwhile, the shares of The Tata Group have advanced 192 percent at this time, jumping from ₹79 in 2017 is now trading around ₹230.

About two

Adani Power is a subsidiary of the Adani Group. A thermal power producer in India with a power generation capacity of about 12,450 megawatts (MW) consisting of 12,410 MW thermal power plants and 40 MW solar power projects. It focuses on providing power generation and coal trading. The company also has three thermal power plants with a total capacity of approximately 3,170 MW.

Tata Power, a subsidiary of the Tata Group, is engaged in power generation, transmission and distribution, electronic products, and services businesses. The Generation segment consists of generating power from hydroelectric sources and thermal sources (coal, gas, and oil) from plants owned and operated under rental conditions and related ancillary services. The Transmission and Distribution segment consists of the transmission and distribution network, the sale of electricity to retail customers through the distribution network and related ancillary services. Tata Power was the first company to set up the first hydroelectric station in India in 1915.

Income

Both power stocks posted exceptional earnings in the June quarter of FY23 (Q1FY23) on the back of rising power demand.

Adani Power reported a 16-fold jump in consolidated net profit ₹4,780 crore for the quarter ending June 30, 2022. It reported a consolidated net profit of ₹278 crore in the year-ago period. The company’s consolidated income from operations increased by 109 percent ₹13,723 crore as compared to ₹6,569 crore in Q1FY22.

“We have been able to take advantage of the opportunities presented by the effective market situation, leveraging our diversified fleet and operating advantages to meet the rising demand for power. The regulatory problems that have been outstanding for a long time are nearing full resolution, increasing visibility and providing us with liquidity to propel. Our encouragement to realize the strategy our long term and meet the value aspirations of our stakeholders,” Anil Sardana, Managing Director of Adani Power Limited, said in a statement.

Tata Power reported a 103.2 percent increase in its consolidated net profit ₹794.60 crore in the April-June 2022 (Q1) period, beating the street estimate by a wide margin. In the year-ago period, the company reported a consolidated net profit ₹391.03 crore.

Income from operations increased 43 percent for ₹14,495.48 crore, before the road estimate, which has been revenue pegged ₹12,035 crore for the period. TIt had posted income from ₹10,132 crore in the corresponding period last year.

Praveer Sinha, MD and CEO at Tata Power, said, “We have started the new fiscal year on a solid note with all our business clusters – generation, transmission, distribution and renewables – performing well. As a well-prepared company , we are ready to contribute to India’s green energy transition.

Which one should be chosen?

Between these two stocks, Vinit Bolinjkar, Head of Research, Ventura Securities has picked Tata Power over Adani Power despite the latter’s stock performance.

Here’s why:

1) Tata Power aims to expand its distribution footprint to 40 million customers by CY27.

2) The current renewable energy portfolio of 5,524 MW comprises 2,927 MW/932 MW of operational solar/wind capacity, 785 MW of solar under construction, and 900 MW of hybrid capacity under construction.

3) The company aims to increase this to 20 GW by FY27E, by adding 3 GW capacity annually over the next five years.

4)The company’s 4 GW solar cell & module manufacturing unit in Tamil Nadu is also expected to become operational by Q3FY23.

While Adani Power focuses on increasing its capacity across new and existing plants to meet increasing demand, Tata Power is more focused on foraying into renewable energy and aggressively increasing its renewable energy portfolio, which is a key positive for the latter since renewable energy. is the future and the government is very focused on the same, say experts. Also, with the recent surge in Adani Power shares, the valuation has become excessively expensive and Tata Power is better priced at the current level.

Also, the earnings of Adani Power and Tata Power showed an increasing trend. However, Adani Power’s total revenue has grown at a compound annual growth rate (CAGR) of 6.3 percent in the last three years and 6.5 percent in the last five years. On the other hand, Tata Power’s total revenue grew at a CAGR of 13.1 percent in the last three years and 9.2 percent in the last five years. This shows that Tata Power has grown at a faster rate compared to Adani Power.

Sector Outlook

India is the third largest consumer and producer of electricity in the world. However, per capita consumption is less than one-third of the global average, which is a huge unstoppable potential for Adani Power and Tata Power. Experts expect power demand in India to triple by 2040.

Going forward, the Electricity (Amendment) Bill, 2022 will help the sector to revive. The Electricity (Amendment) Bill 2022 allows for multiple distribution licensees, with new licensees able to use the incumbent licensee’s network.

The bill has sought to amend section 62 to allow graded revisions in the tariff over a year and has been proposed for the appropriate commission to fix the maximum ceiling and minimum tariff. Reforms in the power sector by Prime Minister Narendra Modi in the form of the launch of the National Solar Rooftop Portal and the Revamped Distribution Sector scheme focusing on DISCOMs are some other important events to look out for the sector, said Bolinjkar.